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Highmark's vision, dental subsidiaries show steady growth

| Sunday, Feb. 28, 2010

Western Pennsylvania's dominant health insurer, Highmark Inc., is known outside the region not for its health insurance products, but for its vision care and dental products.

Unaffected by geographic-related regulation as is their parent, the vision and dental businesses have experienced steady growth nationwide, which translates into greater revenue flowing back to Highmark.

Davis Vision was acquired by Highmark in 1996, and United Concordia Dental was founded by the health insurance giant in 1971.

"Highmark originally got involved in the dental business because it saw that was a way to better serve their health insurance customers, and as a way to diversify its revenue streams," said Dan Lebish, Highmark's executive vice president of subsidiary business.

Vision care professionals and dentists don't always agree with the reimbursement schedule the Highmark units offer, but they realize joining the programs can be the difference between treating large numbers of patients, or few.

"Realistically, we don't have a choice in joining; providers are afraid they can't afford not to join," said Norman Edelstein, an ophthalmologist for 35 years. "Many insurers offer vision benefits plans, but Highmark is unique in that it owns the plan."

"If I didn't participate in Concordia and other programs, I'd have a very small practice," said Bruce Parker, a solo practice dentist in the business since 1980. About half of his 5,000 patients belong to United Concordia, Parker said.

Edelstein and Parker agree that vision and dental professionals relying only on plan reimbursements couldn't survive, as reimbursements haven't kept up with the rising costs of such things as new equipment, employee salaries and insurance premiums.

"Dentists are caught in a squeeze," said Charles Blair, a dentist turned dental consultant based in Charlotte. "Young doctors join all the dental plans they can because they provide them with patients. But with 65 percent to 67 percent of a typical dentist's revenue taken by operating overhead, and some insurers demanding 30 percent fee reductions to be part of their program, that doesn't leave a lot for profit."

"The big challenge we have is the trade-off between patient care and cost of care," Parker said. "I can get a crown made in China for $35 to $50, or I can get a crown made here by a master technician that costs up to $1,000. You must educate the patient to know what they're buying."

Membership roles and revenue generated by Davis and United Concordia have grown substantially during the past five years, data show. Between 2005 and 2009, the number of members covered by the Davis Vision benefits plan jumped from 31 million to 55 million. Revenue over the same time period increased 61.5 percent, from $305.2 million in 2005 to $492.8 million in 2009.

The number United Concordia members increased 25.4 percent between 2005 and 2009, from more than 6.3 million to more than 7.9 million. Revenues rose 60 percent, from $1 billion to $1.6 billion.

"United Concordia has matured into a real insurance powerhouse," said Tom Limoli, president of dental consulting firm Limoli and Associates of Arlington, Tenn.

Davis ranks as the third-largest vision plan provider in the country, according to data from Business Insurance magazine. United Concordia is No. 2 among dental-only insurers, according to Highmark.

Consumers who are part of the United Concordia or Davis Vision groups for the most part say they are pleased with services provided.

"For the most part, they've covered most of the work I've had down, and I've had some extensive dental procedures, including all four wisdom teeth pulled and a crown replaced," said Neil Jones, of Friendship who has United Concordia coverage through his employer, the University of Pittsburgh.

"Just for routine things like checkups and cleanings, it's worth having the insurance," said Beverly Farber, a Squirrel Hill resident who has coverage for herself and her husband, Bruce, through her employer, the Keystone Oaks School District.

Davis Vision is one prong in Highmark's three-prong, vertically integrated vision services model, all under the umbrella HVHC Inc. In addition to the vision benefits program, Highmark's vision model includes Viva International Group, a wholesale manufacturer of designer eyeglass frames and sunglasses acquired by Highmark in 2005.

Highmark also owns and operates Empire Vision Centers and Eye Care Centers of America, a chain of 438 optical retail stores in 35 states and the District of Columbia that the company purchased in 2006. Seven of Eye Care Centers Visionworks-brand stores are slated to open soon in Western Pennsylvania.

"The retail business is about 50 percent of HVHC's total business," said David Holmberg, HVHC's chief executive.

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